Update: June 2020
EY announced €1.9bn of cash missing, CEO arrested, Wirecard AG filed for insolvency
November 5, 2019
We have previously reported Wirecard’s regional filings were late all around the world; most notably in Singapore, the UK, Australia and NZ. The first has now filed; Wirecard Australia filed its annual report on the 1st of November, almost exactly 6 months after it was due on the 30th of April.
The audit opinion was signed by Grant Thornton on the 28th of October and includes an “emphasis of matter” related to going concern. Grant Thornton appears concerned about the solvency of this business given the substantial (AUD$16M) losses.
The key driver of these losses was an impairment of the acquired Citi Merchant Acquiring business, concurrent with the purchase. This is very unusual accounting. It indicates that the local management does not believe the business is worth the price that has been agreed for it. The acquired Citi portfolios are due to be transitioned onto the Wirecard platform by the end of 2019, but to our knowledge, none have yet been transitioned. Is this related to the impairment?
Download Wirecard Australia 2018 annual report
This impairment begs the question: how are the other acquired Citi subsidiaries performing? Singapore was one of the biggest portfolios acquired, but there have been substantial accounting issues locally, and both of the local subsidiaries are yet to file 2018 accounts. Despite a lack of locally audited financials, these have been consolidated into the group accounts. Furthermore, on the 1st of January 2020 the Singapore Payment Services Act comes into action, and Wirecard has not yet received a license.
The Wirecard Asia (Singapore) 2017 accounts showed $94.8M of goodwill held on the balance sheet from the Citi acquisition; has management done an impairment test on that goodwill for 2018? What risk does that pose to the group financials? How was the group audit completed without a local impairment test?
Will Wirecard provide a full and transparent update here? Are there more impairments coming?
The Wirecard Group Annual report, published in April 2019, stated €0.0M of impairment losses. As the Australia impairment should have been consolidated, this appears to be misleading.
The subsidiary capital and profits listed in Wirecard’s 2018 Einzelabschuss also do not correspond to the numbers listed here. For 2018, it reported that Wirecard Australia A&I Pte Ltd had negative equity of (€5.7M), but the Australian accounts show (AUD$13.0M), equivalent to (€8.0M), taking the AUDEUR rate as of 31/12/18.
Are Wirecard planning to restate these amounts now that they have the final audited subsidiaries, or will they call this “immaterial” and ignore it?
|Wirecard Brazil (€M)||Our|
|Company Reported MCA||400||400|
|Brazil % Estimate||40%|
|Brazil MCA Estimate||160||160|
|Monthly Credit Volume||37.2||37.2|
|Calculated MCA Balance||18.6||18.6|